Non Compete Agreements
With today’s high employee turnover and diminishing company loyalty, the risks of having intellectual property, confidential information, and customers walk out the door with ex-employees have grown tremendously. As a small business owner it is vital that you address these risks by developing (or enhancing) confidentiality policies and Non Competition Agreements and confidentiality agreements. Contact the Florida Attorneys at BCN to discuss a non-compete agreement for your company.
We detail a basic overview of the non-competition Agreements
Non Competition Agreements after the sale of a business, although not actually used to transfer ownership of any business assets, may often be used separately during the course of various business transfer transactions. It provides for the party who is selling a business or business assets to agree not to operate a similar business which will compete with the buyer.
The terms include a geographical limitation (in terms of miles of radius) on how closely such a competing business can be operated. Also included is a time limit (in term of years) that such an agreement will be in effect.
Non Competition Agreements – What You Should Know
Non-compete agreements can arise in a variety of circumstances: employment relationships, stockholder agreements and in connection with the sale of a business. The enforceability of the provision will depend on a variety of circumstances, particularly the state which the restriction is to be enforced. Some states favor non-competes, others do not. This article will only address non-compete agreements under Florida law. If you live in a state other than Florida, you should consult a local attorney in that jurisdiction
With certain exceptions, Florida law prohibits restraints on trade. One of the exceptions is non-compete agreements that meet the requirements of Florida Statute 542.335 (this governs non-competes entered into after 1996 – Florida Statute 542.33 applies to non-competes entered into before then). These requirements can be summarized as follows:
-The non-compete must be reasonable in time, area, and line of business
-Legitimate business interests must exist that justify the restrictive covenant
-The non-compete must be reasonably necessary to protect the legitimate business interests.
The statute provides a non-exhaustive list of “legitimate business interests”. These include: trade secrets, confidential business information, substantial relationships with specific prospective or existing customers, and extraordinary or specialized training. Typically, trade secrets and other confidential information are claimed as the “legitimate business interests”.
After a legitimate business interest has been established, the court will look at whether the non-compete is reasonably necessary to protect the interest. This will depend on the facts and circumstances of the individual case. However, much of the court’s focus will be on: (1) the duration of the non-compete and (2) the extent of the geographic limitation.
Florida’s statute provides some guidance as to whether the duration is “presumptively” reasonable and unreasonable. For instance, in the case of an employment non-compete – less than 6 months is presumptively reasonable and more than 2 years is presumptively unreasonable. Anything in between may, or may not, be reasonable, depending on the facts and circumstances.
Geographic limitations are a bit trickier since the statute does not provide any guidance. A good rule of thumb is that a court is unlikely to apply the non-compete in an area in which the enforcing party does not do any business. For instance, if the enforcing party doesn’t do business outside of Miami-Dade County, a court would probably not enforce the non-compete covenant in Hillsborough County (the Tampa area).
Even if the enforcing party manages to satisfy all of the above requirements, a defendant may have other defenses available to him, which will depend on the facts and circumstances of the case. However, it is important to note that saying “I won’t be able to feed my children if you enforce this non-compete” is NOT a valid defense. The Florida statute specifically states that the court must not consider any individualized economic or other hardship that might be caused to the defendant.
FLORIDA NON COMPETITION AGREEMENTS LAWYER
Non compete agreements are being increasingly used in the commercial arena. Whether they are enforceable will depend on a variety of factors including their duration, geographic area and the state in which they are to be enforced. If you wish to learn more, consult our Florida non-compete lawyers today for your free consult at 855-LAW-2020. Attorney in your jurisdiction who has experience in this area.
If you have any questions or concerns regarding Corporate or Business law please call or email the Law Firm of Boyette, Cummins, and Nailos, PLLC, today for your free consultation*.
